Blockchain has captured the publics’ imagination in a way that no ledger system has. DLT, the technology behind blockchain, has gone from being a system that power bitcoin to being touted as a possible solution to some of the core problems that the world is facing today. Tokenisation is one such use case.
Tokenisation is the process of linking a real world asset, such as art, real estate, or finance securities, to a digitised representation of said asset in a decentralized system. This process has the potential to reshape how we approach investing, bringing new tradability and liquidity to previously untapped asset classes and bringing new transparency in the process.
Natasha Deloge, Head of the Innovation Hub at the CSSF provided us with more information on the regulator’s approach to tokenisation. She highlighted that it was important to note there was no specific licensing regime for tokenisation as it is rather defined by the asset class and the services provided. Further, the CSSF has currently not issued any guidance on the matter as they would like to sit down with companies and assess use cases to get a pulse of the market. In this matter, they are more focused on currently having discussions with companies on a case-by-case basis. In order to streamline this process, the regulator set up the newly created Innovation Hub, which provides a contact point for these discussions.
Our panel discussion brought together Tokeny Solutions, HQLAX, and VNX to discuss business cases for tokenisation and what is needed to develop the market. All participants noted that the market had seen strong growth in recent years and was well positioned to continue to grow. Luc Falempin, CEO of Tokeny Solutions emphasized the fact that tokenisation is clearly gaining more traction as they see a shift towards institutional players. He highlighted that they’re “increasingly shifting towards funds and securitization vehicles across a wide range of asset classes.” Guido Stroemer, CEO of HQLAX noted that they’ve “seen increasing interest from existing incumbent players to connect to their platform, and to connect mutual clients in order to improve efficiencies and collateral transfers.” Alexander Tkachenko, CEO of VNX pointed out that many participants had moved past their fear of the unknown and were “curious as to the possibilities of tokenisation for their business. In fact, first movers are building critical business cases for how the technology can be implemented and in a few years we expect significantly increased adoption of the technology.”
The livestream closed with a look at the impact and opportunities of the digital finance package, where Chris Hollifield from LFF and Nadia Manzari, Partner at Schiltz & Schiltz delved into the overall digital finance package and its effects on tokenisation. Nadia noted that the package addresses a number of questions that the industry, be it the regulators, lawyers, and players, had with regards to a number of factors, including how to apply DLT to the financial industry in Europe. Nadia emphasized that a key part of the package was the proposal to amend MiFID II directive in order to confirm within the EU that tokenized securities do fall under the directive.
Watch the replay: https://www.bce.lu/live-luxembourg-for-finance/focus-on-tokenisation/